When hundreds of businesses across America started announcing bonuses and pay increases for workers as a result of the Republican tax cut, Democrat Minority Leader Nancy Pelosi was widely derided for calling these amounts “crumbs.”
Specifically, on January 11 she characterized these bonuses and pay increases as “the crumbs that they are giving to workers . . . . It’s so pathetic.”
Undeterred by the derision, she repeated, to further ridicule, her “crumbs” analogy at Florida Atlantic University on January 25. Republicans are even using Pelosi’s quote in political advertising.
As well they should. By referring to bonuses and pay increases as “crumbs,” Pelosi not only showed how out-of-touch she is with the average American family, but she also demonstrated that she hasn’t the faintest clue about economics.
That’s because the bonuses were only an early example of how business tax cuts work. When you reduce government’s take from the bottom line of business operations, it frees up more money for business investment, expansion, hiring and worker training. And all of these things accrue to the benefit of the people who work for the business. Remember, all of a business’s taxes are paid by the business’s workers, customers, and shareholders. So if you work for a company, buy products from a company or own shares in a company (everyone with an IRA or 401k), YOU pay that company’s taxes. So cutting business taxes literally cuts taxes on you.
Clearly, Nancy Pelosi doesn’t get it.
But . . . (drumroll, please) . . . Nancy Pelosi isn’t the only one who is out-of-touch and doesn’t understand economics.
When Commerce Secretary Wilbur Ross says the impact of his aluminum and steel tariffs on consumer goods is “no big deal,” I’m struck by how similar Ross’s attitude is to Pelosi’s. When Ross argues that the tariffs will only increase the prices of cars, trucks, aerospace, building construction, beer and soda cans a small amount, isn’t he making the “crumbs” argument? Isn’t he showing how out-of-touch he is?
The same workers and consumers who benefit from the tax cut will pay higher prices because of the steel and aluminum tariffs. And the same companies that have lower taxes will now have higher raw material costs. The Trump administration gives with the tax cut, but takes away with tariffs.
And when Wilbur Ross, Peter Navarro and President Trump call trade deficits “losses,” they show how desperately they don’t understand economics. There’s a reason the Dow Jones Industrial Average plunged after the tariff announcement—a lot of people actually DO understand economics.
President Trump seems to view trade through the lens of a profit & loss statement—how much money went out the door compared to how much money is coming in the door. But when we trade, we receive back an equal amount of value. No one “lost” anything--we BOUGHT something.
In other words, if we’re going to consider our trade deficit with China to be a loss, then every time you go to the grocery store, you LOSE. You have a trade deficit with the grocery store—all the money flows to them, and the goods flow to you. Boy, that grocery store really pulled one over on you!
But of course you don’t consider it a loss, because it isn’t one. Neither is a trade deficit.
Nancy Pelosi’s “crumbs” are no different than Wilbur Ross’s “no big deal.” Same economic ignorance; same out-of-touchness with American families.